• With: Joe Rago, Kim Strassel, Dan Henninger, James Freeman


    But this really -- this is an important moment. I mean, I miss the sequester already.


    It was that one brief shining moment where the government actually spent less than it had in previous years.

    GIGOT: But do you side with Boehner or do you side with the activist groups? Was Boehner right to rebuke them for opposing the deal before it was out there?

    FREEMAN: Well, again, I think if you want to talk about who -- OK, they opposed it. You knew it was going -- they were going to break the sequester. I think that's somewhat disingenuous. The Republicans telegraphed that they were going to go there. But, look, blame the people who forced the Republicans to spend more.

    GIGOT: All right, yes. OK.

    When we come back, six months after we first found out about its Tea Party targeting, the IRS has a new plan to silence conservative groups. The details are next.


    GIGOT: Well, if you thought IRS targeting was a thing of the past, think again. We learned this summer that the agency singled out Tea Party groups applying for tax-exempt status for extra scrutiny. And now it looks like they are at it again, attempting to further restrict the political speech of conservatives with new regulations.

    Kim Strassel has details.

    So, Kim, you wrote in your column this week about these new IRS regulations, which they've issued, which will focus on so-called 501-C-4 nonprofit groups, so-called social welfare groups that are supposed to be allowed to participate in politics as long as it's not more than 50 percent of what they do. At least that was the traditional definition. So how has that changed?

    STRASSEL: Treasury put out these rules over the kind of media blackout of Thanksgiving, as usual. And what these rules basically have done is say, here's a new category of all these different things that you are not allowed to do any more if you still want to claim that you're a tax except group under 501-C-4 status.

    GIGOT: Right.

    STRASSEL: Now, the administration and treasury came out and claimed that this was necessary and useful because it was going to clarify what was, in fact, a very confusing rule. What we have just find out in the past week, House Ways and Means investigators are now comparing this rule to all of those tax-exempt applications from Tea Party groups that were targeted in the first round. What they're discovering is this rule looks like it was reverse engineered. Meaning, it appears that treasury has taken all those activities that these Tea Party groups were set up to do and restricted them. And so rather than being a clarifying rule, this rule is, as House Ways and Means Chairman Dave Camp said to us this week, it's about shutting these groups down. It's a new form of targeting, only more expansive, systematic, and with the force of law.

    GIGOT: What about the point though that the administration makes? We've heard time and again from our friends on the left that actually these rules were ambiguous and, therefore, you do need, for the sake of the IRS and for these groups themselves, the clarity that says, A, this is allowed, B, this isn't, C, this is allowed, D, this isn't. What about that?

    STRASSEL: One of the reasons that these rules are a bit ambiguous is because who is to say what is social welfare, Paul?


    A lot of these Tea Party groups, for instance, were set up because they wanted to educate Americans about the problems of big debt. OK? Is that not social welfare? And really, is it for the IRS to claim that it's not?

    Another aspect of this, though, too, Paul, is that these rules were designed only to apply to groups acting as social welfare. If you're a 501-C-3 like charitable group, for instance --

    GIGOT: Right.

    STRASSEL: -- or more importantly, a 501-C-5, which is a union, you're still allowed to do all these activities that have been restricted for a 501-C-4.

    GIGOT: So you're saying that these new rules are skewed so they'll end up covering more conservative groups while exempting most union activities and many convention charities that still operate politically on the left, is that fair?

    STRASSEL: Absolutely, for all kinds of interesting reason. It's the 501-C-4 category, the social welfare group category, where most conservative organizations have swelled into in the past couple of years. And it's what Democrats are most concerned about in terms of elections. So they're focusing all their efforts on that category, because they know it will do the most damage to President Obama's political opponents.

    GIGOT: Dan, what's the larger political context here for these new IRS rules? You would think there would be some political cost here for the administration to do this, given the uproar in the spring and summer.

    HENNINGER: I think basically, the way to understand this, Paul, is it all goes back to the Citizens United decision which allowed corporations to --


    GIGOT: By the Supreme Court?

    HENNINGER: By the Supreme Court. The Democrats are obsessed with Citizens United. Barack Obama himself criticized the justices sitting in front of him at one of his State of the Union speeches over it. They're afraid that private groups, like corporations, might give money to some of the advocacy groups to do this kind of political outreach. And they want the names of those corporations exposed so that they can then harass and intimidate them with campaigns, saying that we will boycott your product if you support these groups. They're afraid that all this money is going to come in and tip the balance against their politics. And so they're going to intimidate these people out of politics with IRS rules and with disclosure.

    GIGOT: Joe, the Democrats and the administration, the president, in particular, he's changing his tune, the tone of his reaction to the IRS scandal now from what he did when it was first announced when he expressed real outrage. Now he's saying something different.

    RAGO: Right. If he really means that, I think he'll get the IRS out of the business of regulating political speech at all. You know, why is the agency that's set up to collect revenues -- its ever aggrandizing powers are spreading into dispensing entitlements, whether through health care or the earned-income-tax credit. If he really means it, he'll just make it a neutral arbiter and get it out of this or that technicality here.

    GIGOT: You know what, Joe? I don't think that's going to happen --

    RAGO: I'm not holding my breath.


    GIGOT: -- as wise as it would be.

    We have to take one more break. When we come back, "Hits and Misses" of the week.


    GIGOT: Time now for "Hits and Misses" of the week.

    Dan, first to you.

    HENNINGER: Well, a hit to Time magazine which named its "Person of the Year" this week. And in the run-up to it, the week before, it was widely rumored the "Person of the Year" was going to be Miley Cyrus or Edward Snowden, of Russia, or even Kathleen Sebelius. Well, as it turned out, it was Pope Francis I. You've got to ask yourself, what kind of editorial mind can hold in its head the same time the twerking Miley Cyrus and Pope Francis I? In any event, we have to thank God for small favors. The pope came in first.